The Philippines’ first foray into the Chinese debt market happens on Tuesday, March 20, with an issuance of three-year panda bonds worth 1.46 billion renminbi or about P11.9 billion, the government’s Investor Relations Office said Monday.
In a statement, the IRO said that the settlement of the IOUs issued in China by non-Chinese governments or firms will be on March 23.
“The issuance will be taking advantage of the bond connect scheme, which allows offshore investors to participate. Demand from both onshore and offshore investors will allow the Republic to secure a favorable rate upon pricing date,” the IRO said.
According to the IRO, the renminbi proceeds of the panda bond sale “will be deposited with the Bangko Sentral ng Pilipinas as part of its international reserves and converted to peso and deposited at the BSP.”
“The proceeds will help fund government infrastructure projects and other financing requirements,” the IRO added.
The Duterte administration is embarking on the ambitious “Build, Build, Build” program aimed at ushering in the “golden age of infrastructure” in the country.
Under “Build, Build, Build,” the government plans to rollout 75 flagship, “game-changing” projects, with about half targeted to be finished within President Duterte’s term, alongside spending a total of over P8 trillion on hard and modern infrastructure until 2022.
The government was also eyeing to further increase next year’s national budget, earlier estimated by Budget Secretary Benjamin E. Diokno at a record-high P4.2 trillion, of which P3.7 trillion will be cash.
The IRO quoted National Treasurer Rosalia V. de Leon as saying that the government was “upbeat” about its inaugural panda bond issuance “because of the significant interest from the market based on the inquiries and feedback we have received.”
Last week, a Philippine delegation led by De Leon and Bangko Sentral ng Pilipinas Deputy Governor Diwa C. Guinigundo met with potential investors in China, Hong Kong and Singapore via an international deal roadshow in order to explain the terms of the panda bond sale as well as update investors about the Philippine economy, the IRO said.
“The Philippine delegation’s economic briefing received overwhelming participation, particularly from onshore investors in Beijing,” it said.
“The panda bonds issuance is very timely given the sustained strengthening of the Philippines’ credit profile, which is a result of long history of vital structural reforms. Investors have been encouraged to invest because the Philippines is one of the fastest growing economies in the region with a strong record in inflation management. Moreover, the country enjoys resilient external payments position, improving debt dynamics, and stable banking system,” the IRO quoted Guinigundo as saying.
According to the IRO, “the Philippines’ maiden issue of panda bonds affirms the country’s improving bilateral relations with China and the increasing relevance of the renminbi,” citing that the Chinese currency was included by the International Monetary Board in its special drawing rights’ basket of currencies in 2016.
Finance Secretary Carlos G. Dominguez III, who heads the Duterte administration’s economic team, said that the government was “confident of the success of the Philippines’ first venture in the panda bond market.”
“This is one of the concrete results of President Duterte’s independent foreign policy,” Dominguez said. /je